1.

Introduction In our group discussion, we came up with some types of things that we would like to sell

as our product for the group project. Some of the products we had listed were souvenirs such as key chains, mugs, and buttons, and we also would like to sell cupcakes. However, after we discussed the advantages and disadvantages, we decided to sell chips. As for the Managerial Accountings project, we chose Chips & Deal as our business name since we have to sell chips and deal with customers. We had searched some suppliers through the internet and also walked around some places. In addition, we also asked from our families, relatives and friends, perhaps they know where to get the supplier of chips who offers cheap price. It is very important to obtain the supplier with the cheapest price because this will determine our price in sell back to people. After two weeks trying to find the supplier, we got one from Sepang. We bought the chips from Kilang Kerepek Mesrinah, the supplier that we found from the internet. We shared our money as our capital to start our business. Since our group contains five persons, thus each person will contribute same amount which is RM 64.40. Before we buy the chips, we took a look the brochure from the page of the supplier. Since we will re-pack the chips, we chose to buy in bulk of five kilograms for each type of chips. Moreover, we decided to buy two packets of spicy chips, two packets of barbeque chips, two packets of finger chips and two packets of original flavor chips. In repacking the chips, we have additional capital in the form of machinery and other goods. We brought in weighing tool, sealer, and plastic packet. We repacked the five kilograms into 100 grams in each packet which we will sell it later to customer. Based on the costs that we
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had to bear, fixed costs and variable costs, we made a decision to sell each packet for RM 1.50. It was merely based on the target pricing since the market price is RM2 which is slightly higher than our price and the market quantity is slightly lesser than ours. Furthermore, the chips were sold only in mahallah safiyyah, hafsa, asma, and halimatus saadiah since we all live there. We sold the chips by going room to room and also put some of the packets at pantry in each block especially in Mahallah Safiyyah. Another way we sold the chips was during class hour. We sold it to our classmates, who were interested to buy it. In average, most of the customers like to pick the spicy chips and the BBQ chips. Because of that, our stock for spicy chips and BBQ chips was run out first than the original one and the finger chips. More than 90 percent of the stocks were sold in a month. However, we faced some problems throughout our project. When we put some packets of chips at each block, some of them were unpaid. Thus, in our report, we will present the budgeting of this project, the calculation of the cost-volume profit analysis and the actual income statement at the end of the sales period. With this calculation, we will determine either we put the resources effectively, or we managed the costs successfully, or we got profit from the business.

1.1

Costs classification

There were several types of cost that we had to bear, such as cost of transportation, the chips themselves, and more. The table below shows list of costs as well as their classification, either fixed or variable cost. As we can see below, transportation and wages of admin are fixed cost, RM50 and RM60 respectively. The chips themselves, we bought at price of RM258 for 40 kilograms and we get extra 1 kilograms for free. Therefore, we divided the price with the quantity, and thus we got RM0.63 per 100 grams of chips. Moreover, the plastic envelope that we used to pack those chips was listed under overhead cost. We bought the plastic in bulk for RM14. The quantity was unknown since it was sold in term of kilograms.

Type of cost

Fixed Cost (RM) 50

Variable Cost/100 gram (RM)

Overhead cost

Transportation Chips Plastic packet Wages of Admin Total

0.63 14 60 110 0.63 14

2.0

Budget Analysis 2.1 Sales Budget

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Total quantity of our product is 410 packets and we estimated all these packets were sold out. The projected units are multiplied by RM 1.50 and the sales budget was for a month which was our selling period in order to determine the budgeted revenue for the month.

CHIPS&DEAL SALES BUDGET FOR A MONTH Budgeted Sales (Units) Selling Price Per Unit (RM) Total Revenue (RM) 410 1.50 615

2.2

Overhead Budget The overhead budget shows the cost of overhead expected to be incurred in the

selling process during the budget period. Chips & Deal overhead budget lists the expected cost of overhead item for a month. As mentioned earlier, the overhead cost was only the plastic packet, and therefore, the overhead total was RM14.

CHIPS & DEAL OVERHEAD BUDGET FOR A MONTH

(RM) Plastic packet Total Overhead 14.00 14.00

2.3

Cash Receipt Budget We expected that, 95% of the chips were sold and the remaining 5% were unsold

or unpaid. During the month, the sales were expected to be collected RM 584.25 which was 95% from sales budget (RM615). 5% from sales budget (RM615) which is RM 30.75 was expected uncollected.

CHIPS&DEAL CASH RECEIPT BUDGET FOR A MONTH Sales 95% x RM 615 5% x RM 615 Total Cash Collections (RM) 584.25 30.75 584.25

2.4

Cash Disbursement Budget

The total purchase price of chips was RM258 for 40 kilograms, while the plastics price was RM14. Since our business was based on the re-sell, we only incurred these two purchases and the cash disbursement budget is as follow:

CHIPS&DEAL CASH DISBURSEMENT BUDGET FOR A MONTH Price (RM) Purchases : Chips Plastic packet Total Cash Payments For Product (RM) 258 14 272

2.4

Cash Budget (collection and disbursement) The cash budget is a combination of the cash receipts budget, the cash

disbursements for materials budget and other cash disbursement required, such as for direct materials, overhead, etc. This cash budget directly starts with the cash collections that are found on the cash receipts budget. There was no beginning cash balance in this project. The cash outflow for product is found on the cash disbursement budget. The disbursement was totaled and then subtracted from the total cash available for the month. In the month, there was an excess which is RM 312.25.

CHIPS&DEAL CASH BUDGET (COLLECTIONS AND DISBURSEMENT) FOR A MONTH

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(RM) Cash Collections Total Cash Available Less : Disbursements Chips Overhead (plastic envelope) Fixed expenses Total Disbursement Excess or Cash Available Over Disbursement (RM) 258 14 110 382 202.25 584.25 584.25

2.5

Budgeted Income Statement For the whole month, we expected that all chips were sold out. The table below

shows the budgeted income statement for a month. As for budgeted income statement for the month, the amount of revenue is taken from the sales budget. Cost of goods sold is the total amount of product purchased. Gross margin is revenue less cost of goods sold. The expenses are taken from the wages expenses, transportation expenses, and miscellaneous expenses. The budgeted income statement depict that we expected to gain net income. The net income is gross margin less total expenses. CHIPS&DEAL BUDGETED INCOME STATEMENT FOR A MONTH
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(RM) Revenue (410 units x RM1.50) Less: Cost of Goods Sold (chips) Gross Margin Less : expenses Transportation Wages of Admin Miscellaneous Total Expenses Net Income 60 50 14 124 233 258 357 615

3.0 3.1

Cost Volume Profit Analysis (CVP) Production cost We bought bulk of packets of chips from our supplier at RM258 for 40 kilograms. Therefore, the cost was RM0.63 and we sold to our customer RM1.50 per packet. Each packet contains 100 grams of chips. We charged the pre-mentioned sale
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price as we considered it is affordable for customers to buy it since our customers are students. Besides that, the market price for the chips usually at RM2 per packet. The early-mentioned fixed costs 3.2 Volume or level of activity We bought 40 kilograms of chips, meaning that 400 packets of chips and got extra 1 kilogram of chips which was equivalent to 10 packets of chips. Therefore, the total packet of chips was 410 units. Within the first half of the month, we managed to sell 160 packets. Therefore, our sales revenue is RM240 at 160 packets. The remaining balance was sold later. 3.3 List and type of cost (fixed and variable) Fixed Cost Price (RM) Variable Cost Price/unit (RM) Transportation Cost Wages of Admin TOTAL 50 60 110 0.63 Chips 0.63

3.4 3.4.1

Break-even analysis Break-even point in unit:

Total Fixed Expense Selling Price-Variable Cost RM110 (RM 1.50-RM 0.63)

= 126.44
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= 127 packets (rounded-off) We need to sell 127 packets of chips in order for us to cover all the expenses, fixed and variable costs.

2.4.2

Break-even point in ratio (RM):

Fixed Expense Unit Contribution Margin = RM110 RM 0.58*

= RM 189.65 *RM 0.87 (unit contribution margin) RM 1.50(selling price) OR, in simple way = 127 packets X RM1.50 = RM190.50 The difference between these two amounts was because of the rounding effect. 3.5 Target Net Profit

Fixed Expense + Target Net Profit Unit Contribution Margin

Number of Sale units required to earn target net profit

RM 110 + RM 150 RM 0.87

= =

298.85 packets 299 packets (rounded off)

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As we mentioned earlier, 127 packets sold is just to cover the fixed cost. But, of course we do want a profit. We decided to pick RM 150 as the target net profit because we can easily distribute the profit among five of us. We roughly pick the profit before the sale has been made because we do not want to expect more but just a reasonable and rational amount of profit. Thus, we need to sell 299 packets so that the targeted net profit is achievable. 3.8 Margin of safety Safety Margin = Budgeted Sales Revenue Breakeven Sales Revenue = 410 packets 127 packets =283 packets In order to make our business feel close projected operation, we need to sell 283 packets and above. Thus, 283 packets is the amount by which sales can drop before losses begin to be incurred. The graph below shows the area of where profit and loss will incur in certain point of units.

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3.9

Zakat effect Before Zakat = Target Profit 1- Zakat Rate

= RM150 1-0.025* = RM153.85

*assume zakat rate 2.5% At the end of the sales period, instead of paying zakat, we donate the money to mosque as to purify our income.

4.0

Actual Income Statement At the end of the period, we only managed to sell 381 packets of chips, which is less than the expected percentage (95%). Thus, we have prepared the income statement based on the actual quantity sold. CHIPS&DEAL INCOME STATEMENT FOR A MONTH

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(RM) Actual Sales Revenue (381 units x RM1.50) Less: Cost of Goods Sold (chips) Gross Margin Less : expenses Transportation Wages of Admin Plastic envelopes Total Expenses Net Income 60 50 14 124 207.50 240 331.50 571.50

Conclusion In conclusion, the sales period for our business on selling chips was about 1 month. Along this period, all of us faced a little hardship but in spite of it all of us felt happy and satisfied on the business that we worked on. Just as shown from our budgeting and CVP, the overall results of our business was that we are gaining profit despite our little loss that we had from this business. This loss happens was

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due to the customer who did not paid for the chips they took and as for the profit that we got, we distributed back our capital and our the profit left among us. From this project, all of our group members gaining much more understanding on budgetting, cvp and on how business field is. This happens when we worked on our business, we experienced difficulties. For example competitors, how to put our price on the chips that all of us going to sold and also experienced losses of our chips per packet that we sold. From this difficulties, we came out with ideas on how to handle the problems and what might be the best solution to take. As the result, we took an initiative to sold chips directly to each of the students in order to prevent from anymore losses. Besides that, we also put our effort more on the weight of chips per packet and counted for any possibilities that we might gain loss from the method that we use. As for the closure of our project, this project that we had done, had taught us to put on more effort, competency, persistence, and also valuable experienced. In the future, we may continued on doing this business and perhaps in addition to what we had done, we may decide to sell more types of chips and packing our chips in a more special package to attract more of our customer and also enlarging our market to another place.

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